The E-myth Revisited

The best bits of Michael Gerber’s book about thinking like a franchise

Entrepreneur... or technician?

Three key takeaways - click to expand each one and learn more:

Dispelling the e-myth: People who are good at something, and who start doing it for themselves, aren’t entrepreneurs as is often supposed: they’re technicians

Gerber identifies three necessary types of roles in a company - technicians, managers, and entrepreneurs.

Technicians ‘do the work’. Managers organise and run the operation. Entrepreneurs envision and catalyse how the business will succeed into the future.

These roles each have limits. Technicians are limited by the work they can do themselves, managers by how many technicians that can manage, and entrepreneurs by how many managers they can inspire.

The issue is that many technicians start their own business because they are good at what they do, and want the freedom to it their own way. However, without someone playing a true entrepreneurial role, and without managerial rigour, technical skill is insufficient for running a successful company.

The ‘franchise prototype’ perspective: The role of the entrepreneur is to build an organisation that can flourish without them, by configuring it to be replicated many times over

Instead of prioritising doing the work in the business - as a technician would - the entrepreneur must work on their business. Gerber proposes entrepreneurs focus on creating a ‘franchise prototype’.

The entrepreneur should view their business as something that could be the first in a whole chain of organisations like it. Their challenge becomes ‘How can I systematise my business in such a way that it could be replicated 5,000 times, so the 5,000th unit would run as smoothly as the first?’

Whether the organisation ever actually becomes a franchise is irrelevant. The perspective causes the entrepreneur to put in place a vision, team structures, and robust processes that can be repeated over and over again, and can be systematically improved. Crucially, it also requires them to build a business that can run – and scale – without relying on the founder.

The entrepreneur can analyse constraints that are hindering the prototype, identify and test potential improvements within the confines of the prototype, and then roll out those improvements to the rest of the organisation if they are successful. Gerber calls this process, which has some similarities to the Lean Start-up method, ‘innovation, quantification, and orchestration’.

The flourishing franchise: Businesses that can reach maturity are those where there is order, purpose and predictability in what the organisation pursues, how it engages its customers and how it organises its people

Gerber argues the entrepreneur should:

• Begin with the end in mind. By first deciding what kind of life they want to live, they can then use the implications to appropriately shape how the business is run. “Great people have a vision of their lives that they practice emulating each and every day.”

• Understand what customers really buy, appreciating the difference between the commodity the customer gets when making purchases, and the feelings they experience as a result of their relationship with the business doing the selling. “People buy feelings”.

• Adhere to a basic delegation principle for work distribution - 'in general, a given piece of work should be done by the person with the lowest level of skill who’s able to do it’. This encourages the person in question to grow in confidence as they become increasingly good at something that was previously only just within their capability. It frees up more skilled people to do other more challenging things. And – assuming the person with the lower skill level is paid less – manages staff costs.

• Organise around responsibilities, not people (similar to Traction Accountabilities). This approach sets out what needs to be achieved across the organisation, and then who's job this is. Clear expectations are created, which people can be coached to improve against, and rewarded for delivering. “Without an Organisational Chart, everything hinges on luck and good feelings, on the personalities of the people and the goodwill they share.”

If you’d like to learn more, you can buy The E-myth Revisited here.